IT is the good fortune of the cooperative industry that its significant role in the propping up of our country’s economy, especially in these hard times, has finally been acknowledged. Last Tuesday, Malacañang signed into law the Philippine Cooperative Code of 2008 that will grant cooperatives banking powers without losing their tax privileges.

It has long been overdue. Recently, while reading a 2004 report by the Cooperatives Development Authority, I discovered that in 2003 alone, the national average savings generated and mobilized by this little-known sector amounted to a staggering R113 billion, 10 percent of the national budget at that time.

In 2006, data showed that the sector generated 1,636 million jobs, 1.56 million in 2005 and 1.498 million in 2004. Would you believe that its growth rate is higher than that of rural banks? The paper predicted that this will balloon to over R140B this year.

These figures speak volumes about the vibrancy of local cooperatives industry. Significantly contributing to keep it in the pink of health is R.A. 6938, the Cooperative Code of the Philippines. Incidentally, this important piece of legislation was authored by former Senator Butz Aquino who has remained as the moving spirit behind the continued surge of cooperatives around the country today.

If there is one thing that can be said about Aquino, it is the fact he did not abandon his “baby” even after his congressional stint. Acknowledged as the father of modern cooperatives, Aquino, in coordination with other self-help advocates, has been going around the country evangelizing on the big returns and rewards of the coops business. With missionary zeal, he also conducts workshops and seminars to keep stakeholders attuned and responsive to the needs of a fast changing business milieu.

Concurrently chairman emeritus of the National Cooperatives Movement, umbrella organization for local cooperatives, Aquino is one of the brains and prime movers behind the Cooperative Insurance Deposit System Federation Cooperatives. Established last year, CODIS spurs the vigorous growth of this burgeoning industry.

CODIS is the industry’s counterpart of Philippine Deposit Insurance Corporation which ensures the return of bank deposits up to R250,000 should host banks encounter liquidity problems. With this insurance mechanism in place, the small depositors’ multi-million-peso deposits held by cooperatives, are now safe from scammers who abscond the hard-earned money of unsuspecting members.

Updated data shows 75,000 various cooperatives nationwide of which 4,812 are credit coops; 1,369 consumer’s; 33,352 multi-purpose agri-based and 24,623 non-agri-based coops. In Metro Manila alone, almost all of the more than 3,500 coops are into money lending and savings activity. And the number of “kooperatibas” is still growing, thanks to the dedication and commitment of people like Butz Aquino and those of his kind.

MANILA, Philippines – (UPDATE) President Gloria Macapagal-Arroyo signed into law on Tuesday Republic Act 9520 or the Philippine Cooperative Code of 2008 which will strengthen the cooperative system in the country.

“The new cooperative legislation gives cooperatives greater opportunities to serve their members, not only in terms of financial assistance, but also in undertaking more productive activities geared towards the upliftment of their members,” the Palace said in a statement.

“The new cooperative code outlines in greater detail the requirements in professionalizing the management and operation of cooperatives, while providing a monitoring and evaluation tool for the cooperatives to conduct self-assessments in terms of its managerial, financial, and social objectives,” it said.

Amendments to the cooperative code were sponsored by the late COOP-NATCCO Representative Guillermo Cua.

Among the most significant changes in the new code is the section allowing the conversion of Credit Cooperatives into Financial Service Cooperatives.

“When members of a credit cooperative deposit their money and their pool gets bigger, they will naturally want more sophisticated services. With this amendment, credit cooperatives can evolve into a Financial Service Cooperative,” Congressman Jose Ping-ay, newly appointed COOP-NATCCO representative who replaced Cua, said in a statement.

A Credit Cooperative is a financial organization owned and operated by its members that creates a pool of savings from which loans for productive and provident purposes are drawn – all for the benefit of members.

A Financial Service Cooperative is an outgrowth of credit cooperatives, and is defined in the Code as a “financial organization owned and operated by its members and authorized to provide the same services as credit cooperatives plus other financial services subject to regulation by the Bangko Sentral ng Pilipinas (BSP).”

This means that Financial Service Cooperatives will be providing more than just savings and loans services, which cooperatives have been known to offer.

The Code does not list down the particular services Financial Services Cooperatives can provide although the minimum capital requirements prescribed in the General Banking Act will determine what services a Financial Services Cooperative can offer.

Depending on the capitalization, a Financial Services Cooperative can provide services like opening current or checking accounts, act as depositary of municipal, city or provincial funds where the cooperative is located, act as collection agent for government entities like the Social Security System (SSS) and Government Service Insurance System (GSIS), or even buying or selling foreign exchange.

The Code also stipulates that if a credit cooperative decides to “exercise enhanced functions,” it must first notify the Cooperative Development Authority (CDA) and the BSP and “satisfy the requirements for conversion to Financial Service Cooperative.” The CDA and BSP will soon be issuing rules governing the conversion.

The Supreme Court (SC) has affirmed a Court of Appeals (CA) decision that ordered the Davao Oriental Electric Cooperative, Inc. to pay the Davao Oriental provincial government some R1.8 million in real estate taxes, excluding penalties and surcharges, from the time the government lifted the tax exemptions of electric cooperatives in 1984.

In a decision written by Chief Justice Reynato S. Puno, the SC affirmed the Nov. 15, 2005 CA decision that reversed the ruling of the regional trial court (RTC) that dismissed the collection suit filed by the province of Davao Oriental.

At the height of the economic crisis in 1984, the late President Ferdinand Marcos issued Presidential Decree No. 1955 that withdrew all exemptions from the payment of duties, taxes and other charges granted to private business enterprises engaged in any economic activity, including electric cooperatives.

Two years later on Jan. 8, 1986, Marcos issued PD 2008 that required the then Ministry of Finance to immediately restore the tax exemption of all electric cooperatives.

But after Marcos was replaced by then President Corazon C. Aquino, the latter issued Executive Order No. 93 that withdrew all tax and duty exemptions granted to private entities effective March 10, 1987.

The implementation of EO 93 for electric cooperatives was suspended until June 30, 1987.

On July 1, 1987, the government restored the tax and duty exemption privileges under PD 269, the law that created the electric cooperatives.

While the tax exemption was suspended, the Davao Oriental provincial government assessed the value of the province’s electric cooperative.

The assessment became final and executory after the cooperative failed to protest the assessment before the Board of Assessment Appeals.

In May, 2000, the Davao Oriental provincial government filed a collection suit before the RTC which dismissed the case.

On appeal, the CA reversed the RTC and ordered the cooperative to pay the provincial government some R1.8 million in realty taxes, excluding penalties and surcharges, from 1985 to 1989.

The cooperative elevated the case to the SC. The cooperative told the SC that it was exempted from the payment of real estate tax from 1984 to 1989 because the restoration of tax exemptions under Fiscal Incentive Review Board (FIRB) Resolution No. 2487 “retroacts” to the date of withdrawal of said exemptions.

In resolving the issue, the SC said that the CA was correct when the appellate court ruled that FIRB Resolution No. 24-87 “bares no indicia of retroactivity of its application.”

“A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception,” the SC stressed.

At the same time, the SC said that when the electric cooperative failed to exhaust administrative remedies by appealing the assessment of its properties, it cannot assail the validity of the said assessment before the courts.

“Petitioner is deemed to have admitted the correctness of the assessment of its properties. In addition, Section 64 of PD No. 464 requires that the taxpayer must first pay under protest the tax assessed against him before he could seek recourse from the courts to assail its validity,” the SC pointed out.

“In view whereof, petitioner’s appeal is denied. The Nov. 15, 2005 decision of the Court of Appeals in CA-G.R. CV No. 67188 is affirmed,” it ruled.